Compare the Market has warned households to brace for more electricity price pressure this year, despite easing wholesale volatility, with a mix of factors squeezing the market from all sides.
Australians will get a steer on where their bills could be headed when the Australian Energy Regulator (AER) and the Essential Services Commission (ESC) in Victoria release their draft benchmark pricing this month.
Despite a pull‑back in wholesale electricity volatility over the past year, Compare the Market’s Economic Director David Koch said Australians shouldn’t expect major bill reductions any time soon.
“Australians deserve some relief and I would argue that prices should stabilise, because we have seen some positive signs of easing pressure in the wholesale energy market,” Mr Koch said. “Some of those savings and benefits from people tapping into solar should start to drive down retail costs.
“Unfortunately, that’s just part of the picture, and the reality is we shouldn’t be lured into a false sense of security just yet.
“As we’ve seen in the past few months, we are not out of the woods when it comes to inflation yet and turmoil in the Middle East could put even more pressure on resources globally. Then factor in our dated infrastructure, transformation plans, network costs and big operating outlays, and it’s a much murkier situation.”
Mr Koch said several key factors could lead to higher electricity prices in 2026-27:
- Sticky inflation: Higher inflation can drive up fuel and transportation costs and raise the price of materials used to manage and maintain the electricity grid.
- Network and distribution costs: Rising material, fuel and labour costs continue to push up the cost of maintaining poles, wires and meters.
- Renewable transition costs: Retailers must meet federal and state renewable energy obligations, incurring significant compliance and investment costs.
- Demand growth: Electricity demand across Australia is expected to almost double by 2050, driven by EV uptake, home electrification and industry transitions.
- Retailer operating pressures: Many retailers require 2–3 years to break even on new customers due to rising acquisition and operational costs.
- Weather volatility: Heatwaves are pushing peak demand higher at night, when solar output drops.
While accelerated investment in renewables could help ease the pressure, Mr Koch said Australians may not feel the benefits for some time.
A recent report from the AEMC found that an acceleration in renewable energy generation and transmission will be key to driving down electricity costs, but unless this occurs faster than currently projected, prices could jump by as much as 13% between 2030 and 2035.
Mr Koch said while everyday Australians may not be able to impact the bigger factors at play, many could save by switching to cheaper deals.
“Last year, 80% of people with the power to switch were spending more than they needed to,” Mr Koch said. “That number has dropped to 73% – a good improvement, but still a long way to go if we really want to move the needle on electricity inflation now all of the government rebates have rolled off.
“Prices vary – even with the same retailer. If you haven’t switched in three years or more, the ACCC says you’re spending an average of $221 more than new customers. That’s a pretty compelling reason to shop around.”
For more information, please contact:
Phillip Portman | 0437 384 471 | [email protected]
Compare the Market is a comparison service that takes the hard work out of shopping around. We make it Simples for Australians to quickly and easily compare and buy insurance, energy, and home loans products from a range of providers. Our easy-to-use comparison tool helps you look for a range of products that may suit your needs and benefit your back pocket.
